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Monday, 14 June 2021

Higher fees on fertiliser exports

Safeya Mounir investigates the impact of a decision to hike the fees on fertiliser exports

Safeya Mounir , Tuesday 9 Mar 2021
Higher fees on fertiliser exports
(photo: AP)
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Earlier this month, the Ministry of Trade and Industry raised the fees on exports of nitrogen fertilisers. An export fee had already been in place, as stipulated by ministerial decree 59/2021, but the Ministry of Trade and Industry has now amended the fee to LE600 per ton.

Minister of Trade and Industry Nevine Gamea said the decision was made after routine monitoring of world fertiliser prices, which jumped in January and February this year. The average price of nitrogen fertiliser on the world market is $370 per ton, compared to $230 per ton in 2020. This meant that export fees needed to be reviewed, she said.

Gamea said the export fees on nitrogen fertilisers would regulate exports and provide the monthly quota earmarked for the Ministry of Agriculture to meet domestic market needs and enable farmers to find the fertiliser they need for their crops.

Ahmed Safwat, secretary of the Fertilisers Division at the Federation of Chambers of Commerce, said the government had taken the decision out of concerns that more fertilisers could be exported.

He said it would still have little impact on exports despite the hike in the export fee by 300 per cent from LE200 to LE600 because there was still a significant profit margin. On the domestic market, one ton of fertiliser sells for $200, or around LE3,000, while it sells for LE6,000 in export markets.

“This means producers will prefer to export to markets overseas,” he said.

However, exporters are complaining about increases in the cost of production inputs. Islam Khalil, sales manager at a fertiliser company, said that the price of plastic packaging had increased, accounting for 20 per cent of cost.

Egypt’s production of urea fertiliser stands at 18 million tons a year, and the domestic market needs nine to 11 million tons each year. There was sometimes poor management and distribution at agricultural co-operatives, Safwat said, with these ordinarily receiving 45 per cent of production.

However, this sometimes does not happen on a regular basis. Urea fertiliser supplies should be built up for four months beginning in April, he said, and before the season begins silos should be stocked with half the amount because the factories could not provide the required amounts in just four months, he added. 

The increased export fee would not benefit this system, Safwat said, and the fees would simply fill state coffers. Even if the fees rose to LE1,000 per ton, producers would still prefer to export fertiliser, he added.

“The price of urea rose on the world market after several countries restarted production after the Covid-19 pandemic had halted it,” Safwat said. He expects the price of urea to rise again worldwide, especially if India begins buying again after the Covid-19 hiatus.

Safwat said Egypt’s agricultural co-operatives do not have stockpiles because they do not make monthly purchases to meet their needs. He expected a crisis to develop next month with the start of the cultivation season.

Khaled Abul-Makarem, chair of the Chemical Industries Export Council, agreed that raising export fees would not negatively impact fertiliser exports or production. He explained that the ministry does not impose or extend export fees on any commodity without first consulting the relevant bodies and studying the impact of any decision on domestic production and the volume of trade on domestic and overseas markets.

Egypt’s fertiliser production was not impacted by last year’s Covid-19 outbreak. Exports of chemical products and fertilisers reached $5.238 billion in 2020, an eight per cent drop on the previous year. Although most exports of chemicals declined, fertiliser exports rose by five per cent compared to 2019 to reach $1.426 billion.

Nitrogen fertilisers are produced by the Alexandria Fertiliser Company (AlexFert), the Misr Fertilisers Production Company, the Helwan Fertilisers Company, and the Egyptian Chemical Industries Company (KIMA). The fertiliser industry is divided into nitrogen, phosphorous, and potassium fertilisers.

Egyptian fertilisers are exported to several countries in Africa, including Sudan, Uganda, Tanzania, and Kenya, as well as Oman.

 

*A version of this article appears in print in the 11 March, 2021 edition of Al-Ahram Weekly

 

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